<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Multicom Publishing, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
October 31, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
which will be held on Thursday, November 21, 1996, at 2:00 P.M., at the offices
of the Company at 1100 Olive Way, Suite 1250, Seattle, Washington.
The Notice of the Annual Meeting and the Proxy Statement have been made a
part of this invitation.
After reading the Proxy Statement, please mark, date, sign, and return, at
an early date, the enclosed proxy in the prepaid envelope, to assure that your
shares will be represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU DATE, SIGN,
AND RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING IN PERSON.
A copy of the Company's Annual Report to Shareholders is also enclosed.
The Board of Directors and Management look forward to seeing you at the
Annual Meeting.
Sincerely yours,
<TABLE>
<S> <C>
TAMARA L. ATTARD PAUL G. ATTARD
Chairman of the Board and President
Chief Executive Officer
</TABLE>
<PAGE> 3
MULTICOM PUBLISHING, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 21, 1996
------------------------
The Annual Meeting of Shareholders of Multicom Publishing, Inc. (the
"Company") will be held at the offices of the Company at 1100 Olive Way, Suite
1250, Seattle, Washington, on November 21, 1996, at 2:00 P.M., for the following
purposes:
1. To elect five Directors to hold office until the date of the Annual
Meeting of Shareholders in 1997.
2. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants.
3. To transact such other business as may properly come before the Meeting
and any adjournment or postponement of the Meeting.
The Board of Directors has fixed the close of business on October 8, 1996,
as the record date for determining the shareholders entitled to notice of and to
vote at the Meeting and any adjournment or postponement of the Meeting. A
complete list of shareholders entitled to vote will be available at the
Secretary's office, 1100 Olive Way, Suite 1250, Seattle, Washington, for 10 days
before the Meeting.
IF YOU DO NOT EXPECT TO ATTEND IN PERSON, PLEASE PROMPTLY MARK, DATE, SIGN,
AND RETURN THE ENCLOSED PROXY.
PAUL G. ATTARD
Secretary
October 31, 1996
<PAGE> 4
MULTICOM PUBLISHING, INC.
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Multicom Publishing, Inc., a Washington corporation
(the "Company"), with principal executive offices at 1100 Olive Way, Suite 1250,
Seattle, Washington 98101, of proxies in the accompanying form to be used at the
Annual Meeting of Shareholders to be held on November 21, 1996, and any
adjournment or postponement of the Annual Meeting. The shares represented by the
proxies received in response to this solicitation and not revoked will be voted
at the Annual Meeting. A proxy may be revoked at any time before it is exercised
by submitting a later-dated proxy or by voting in person at the Annual Meeting.
On the matters coming before the Annual Meeting for which a choice has been
specified by a shareholder by means of the ballot on the proxy, the shares will
be voted accordingly. If no choice is specified, the shares will be voted FOR
the election of the five nominees for director listed in this Proxy Statement
and FOR ratification of the appointment of Price Waterhouse LLP as the Company's
independent accountants.
Shareholders of record at the close of business on October 8, 1996, are
entitled to notice of and to vote at the Annual Meeting. On October 8, 1996, the
Company had 5,612,169 shares of Common Stock outstanding. Each holder of Common
Stock is entitled to one vote for each share held as of the record date. A
majority of the outstanding shares will constitute a quorum at the meeting.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions are
counted in tabulations of the votes cast on proposals presented to shareholders,
whereas broker non-votes are not counted for the purposes of determining whether
a proposal has been approved.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by certain directors, officers, and other employees of the Company by
personal interview, telephone, or telegraph. No additional compensation will be
paid to such persons for such solicitation. The Company will reimburse brokerage
firms and others for their reasonable expenses in forwarding solicitation
materials to beneficial owners of the Company's Common Stock.
This Proxy Statement and the accompanying form of proxy are being mailed to
shareholders on or about October 31, 1996.
IMPORTANT
PLEASE MARK, DATE, AND SIGN THE ENCLOSED PROXY, AND RETURN IT AT AN EARLY DATE
IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO THAT, IF YOU ARE UNABLE TO
ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
<PAGE> 5
ELECTION OF DIRECTORS
The Company has five directors, each of whom is a nominee for election at
the Annual Meeting for a one-year term expiring on the date of the Annual
Meeting in 1997 or until each such director shall resign or until his or her
successor shall have been duly elected or appointed.
Unless authority to vote for directors is withheld, it is intended that the
shares represented by the enclosed proxy will be voted for the election of Ms.
Tamara L. Attard, Mr. Paul G. Attard, Mr. Larry D. Hartsook, Mr. William H.
Luden III and Mr. Henrik N. Vanderlip. All of the nominees are currently members
of the Board of Directors of the Company. In the event any nominee becomes
unable or unwilling to serve, the shares represented by the enclosed proxy
(unless otherwise indicated on such proxy) will be voted for such other person
as the Board of Directors may select. The Board of Directors has no reason to
believe that any of the nominees will be unable or unwilling to serve. The five
nominees receiving the highest number of affirmative votes of the shares
entitled to vote at the annual meeting will be elected directors of the Company.
Set forth below are the names and ages of the nominees and present
directors, their principal occupations at present and for the past five years,
certain directorships held by each and the year in which each became a director
of the Company.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION AT PRESENT AND DIRECTOR
FOR THE PAST FIVE YEARS; DIRECTORSHIPS SINCE AGE
- ------------------------------------------------------------------------------- -------- ---
<S> <C> <C>
Tamara L. Attard............................................................... 1991 38
Chief Executive Officer and Chairman of the Board of the Company since 1991;
Vice President of Operations of Bayseng Spice Company, a spice producer, from
1985 to 1991; Associate Director of Experiential Research, a film production
company, from 1981 to 1985; and Associate Editor of Shooting Commercial
Magazine and On Location Magazine, film industry trade publications, from
1980 to 1981.
Paul G. Attard................................................................. 1992 42
President of the Company since March 1996 and Chief Operating Officer of the
Company from 1992; Vice President of Sales for OWL International, Inc., a
division of Matsushita, which developed interactive multimedia and online
tools and custom solution software, from 1989 to 1992; Director of Reseller
Channel/VAR Sales of Informix Software, a database software company, from
1988 to 1989; held various positions, including Vice President of Sales, at
PacTel InfoSystems, a division of Pacific Telesis, a Regional Bell Operating
Company, from 1984 to 1988.
Larry D. Hartsook(1)(2)........................................................ 1995 53
Vice President of Finance, Meredith Corporation, a home and family media
company, since 1991, and has held various other finance related positions
with Meredith Corporation since 1969.
William H. Luden III(1)(2)..................................................... 1993 53
President of Purdy Electronics, an electronics importing company, since 1995;
President of the Company from 1993 to 1995; President of Speed Control, Inc.,
a variable transmissions company, from 1992 to 1993; President of Finders,
Inc., a database software company, from 1990 to 1992; President and Chief
Executive Officer of Cellular One in Northern California, from 1986 to 1988;
and President and Chief Operating Officer of PacTel InfoSystems, a division
of Pacific Telesis, a Regional Bell Operating Company, from 1984 to 1986.
Henrik N. Vanderlip(1)(2)...................................................... 1993 44
Chairman of Viking Capital Partners, Inc., a private investment firm, since
1993; Senior Vice President and Partner of Wesray Capital Corporation, a
private investment firm, from 1985 to 1995; Chairman of Action Sports Group
LLC, a sports apparel manufacturing company and The Moorings LLC, a sailing
yacht charter company; Director of Avis, Inc., an automobile rental company,
and Rocky Mountain Radio LLC, a broadcasting company.
</TABLE>
- ---------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
2
<PAGE> 6
STOCK OWNERSHIP
The following table sets forth information as of September 30, 1996, as to
shares of Common Stock beneficially owned by each director and nominee for
director named under "Election of Directors", each executive officer named in
the table under "Compensation of Executive Officers and Directors", each
stockholder known to the Company to own more than 5% of the Company's
outstanding stock and the directors and executive officers of the Company as a
group. Except as otherwise indicated, each person has sole investment and voting
power with respect to the shares shown. Ownership information is based upon
information furnished by the respective individuals.
BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
---------------------
NAME NUMBER PERCENT
--------------------------------------------------------------- --------- -------
<S> <C> <C>
Meredith Corporation(2),
1716 Locust Street,
Des Moines, Iowa 50309-3023.................................... 1,373,261 23.5%
Tamara L. Attard(3)............................................ 5,123,111 78.7%
Paul G. Attard(3).............................................. 5,123,111 78.7%
Larry D. Hartsook(4)........................................... 1,373,261 23.5%
Henrik N. Vanderlip(5)......................................... 739,904 13.2%
William H. Luden III(6)........................................ 64,000 1.1%
All directors and executive officers as a group (5
persons)(7).................................................. 5,208,708 80.8%
</TABLE>
- ---------------
(1) Except pursuant to applicable community property laws or as indicated in the
footnotes to this table, to the Company's knowledge, each shareholder
identified in the table possesses sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
shareholder.
(2) Includes certain anti-dilution rights of Meredith with respect to exercises
of options by Multicom employees; such anti-dilution rights entitle Meredith
to obtain up to 226,072 shares.
(3) Includes 2,107,828 shares beneficially held by Ms. Attard, and 35,000 shares
issuable to Ms. Attard and 70,000 shares issuable to Mr. Attard upon
exercise of stock options exercisable within 60 days after September 30,
1996. Also includes 377,248 shares held by Ms. Attard as the Trustee of the
Voting Trust and 569,870 shares issuable upon exercise of stock options
exercisable within 60 days after September 30, 1996 held by parties to the
Voting Trust; Ms. Attard has the sole power to vote such shares on certain
matters, but the nine beneficial shareholders and the nine option holders
have sole power to dispose of their respective shares with certain
limitations on the amounts they may sell. Also includes 1,147,189 shares
beneficially owned by Meredith, 226,072 shares Meredith has the right to
obtain in accordance with the anti-dilution rights described in footnote (2)
above, and 589,904 shares beneficially owned by Mr. Vanderlip; Ms. Attard
has entered into Voting Agreements with each of these parties and has sole
power to vote such shares on certain matters, but has no power to dispose of
such shares. Mr. and Ms. Attard disclaim beneficial ownership of all shares
subject to the Voting Trust and the Voting Agreements except the 68,000
shares owned by Mr. and Ms. Attard as community property and the 10,000
shares held by Ms. Attard as custodian for one of the Attards' minor
children.
(4) Reflects shares beneficially held by Meredith Corporation, as to which Mr.
Hartsook disclaims beneficial ownership.
(5) Includes 589,904 shares held by Mr. Vanderlip and 150,000 shares held by the
Vanderlip Children's 1988 trust. Mr. Vanderlip disclaims beneficial
ownership in shares owned by the Trust.
(6) Reflects 64,000 shares issuable upon exercise of stock options exercisable
within 60 days after September 30, 1996.
(7) Includes 169,000 shares issuable upon exercise of stock options held by
executive officers and directors exercisable within 60 days after September
30, 1996; includes 377,248 additional shares and 453,700
3
<PAGE> 7
additional shares subject to options held by Ms. Attard as Trustee of the
Voting Trust; includes the 1,147,189 shares beneficially owned by Meredith,
226,072 shares Meredith has the right to obtain in accordance with its
anti-dilution rights described in footnote (2) above, and the 150,000 shares
held by Mr. Vanderlip as Co-Trustee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules of the Securities and Exchange Commission (the "Commission")
thereunder require the Company's directors and executive officers to file
reports of their ownership and changes in ownership of Common Stock with the
Commission. Personnel of the Company generally prepare these reports on the
basis of information obtained from each director and officer. Based on such
information, the Company believes that all reports required by Section 16(a) of
the Exchange Act to be filed by its directors and executive officers during the
last fiscal year were filed on time except for Mr. Luden's Initial Statement of
Beneficial Ownership of Securities on Form 3 which was filed one day late.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and the one other most highly
compensated executive officer of the Company ("Named Executive Officers") as of
June 30, 1996 and June 30, 1995, whose total salary, bonus and other
compensation for the fiscal years ended June 30, 1996 and June 30, 1995,
exceeded $100,000 for services in all capacities to the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
--------------------------------------------------- ------------
OTHER SECURITIES
NAME AND FISCAL ANNUAL UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS
- ---------------------------------- ------ -------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Tamara L. Attard.................. 1996 $118,625 $15,368 $ 3,171(1) $140,000
Chairman and Chief Executive 1995 $126,250 $11,809 $ 3,171(1)
Officer
Paul G. Attard.................... 1996 $118,625 $ 4,587 $ 2,484(1)
President and Chief Operating 1995 $120,642 $ 8,575 $ 2,484(1) $140,000
Officer
</TABLE>
- ---------------
(1) Represents the incremental insurance premiums paid by the Company
representing coverage in excess of term insurance for the benefit of the
Company.
4
<PAGE> 8
Option Grants in Fiscal 1996. The following table provides details
regarding stock options granted to the Named Executive Officers in fiscal 1996.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(1)(2) FISCAL 1996 PER SHARE(3) DATE 5% 10%
- --------------------------- ------------- ------------ ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tamara L. Attard........... 140,000 41.4% $ 6.07 7/1/05 $533,400 $1,353,800
Paul G. Attard............. -- -- -- -- -- --
</TABLE>
- ---------------
(1) All of the above options were granted under the Option Plan. The Board of
Directors has discretion, subject to plan limits, to modify the terms of
outstanding options and to reprice the options.
(2) The options generally have a four-year vesting schedule, with 25% vesting
each year on the anniversary of the grant. Vesting may accelerate upon a
transfer of control.
(3) The exercise price per share of options granted represented a price not less
than the fair market value of the underlying shares of Common Stock on the
dates the respective options were granted as determined by the Board of
Directors. The Common Stock was not traded publicly at the time of the
option grants to the Named Executive Officers.
(4) Potential gains are net of exercise price but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the Common Stock, overall market conditions and the option holders'
continued employment through the vesting period. The amounts reflected in
this table may not necessarily be achieved. One share of the stock purchased
in 1995 at $6.07 would yield profits of $3.81 per share at 5% appreciation
over ten years, or $9.67 per share at 10% appreciation over the same period.
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND
FISCAL 1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED 6/30/96 AT 6/30/96(2)
UPON VALUE -------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- -------- -------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tamara L. Attard............... -- -- -- 140,000 -- $60,200
Paul G. Attard................. -- -- 35,000 105,000 $15,050 $45,150
</TABLE>
- ---------------
(1) The amounts in this column represent the number of vested unexercised
options at June 30, 1996.
(2) The amounts in this column represent the difference between the exercise
price and the closing market price of $6.50 on June 30, 1996, for the Common
Stock. The actual value of unexercised options fluctuates with market
activity.
COMPENSATION OF DIRECTORS
During fiscal year 1996, Directors received no cash compensation for their
services as members of the Board. Directors were reimbursed for their expenses
in attending Board and committee meetings. Beginning in fiscal year 1997,
nonemployee directors will receive $500 for each regularly scheduled board
meeting attended. In addition, each nonemployee director who is first elected to
the Board after June 24, 1996 (the "Effective Date") will receive a stock option
to purchase 8,000 shares of Common Stock pursuant to the 1996 Outside
5
<PAGE> 9
Directors Stock Option Plan, unless he or she (i) owns, or performs services for
an entity which beneficially owns 0.5% of the total combined voting power of the
Company, or (ii) was already serving on the Board at the time that he or she
became a nonemployee director. In addition, each nonemployee director will
receive an annual stock option to purchase 2,500 shares of Common Stock. The
"annual option" will be granted on each anniversary of the Effective Date, if he
or she was serving as a nonemployee director as of such date, or the anniversary
of the date on which he or she first became a nonemployee director.
CERTAIN TRANSACTIONS AND EMPLOYMENT AGREEMENTS
CERTAIN TRANSACTIONS
Equity Investments
On June 4, 1994, the Company issued Meredith Corporation ("Meredith") an
aggregate of 824,000 shares of its Series B Common Stock (the "Meredith Shares")
in a private venture funding at a purchase price of $6.07 per share. The
purchase price was paid in a combination of $2,900,000 in cash and $2,100,000 in
unearned royalties owing on products created by Multicom under license from
Meredith. Under licensing agreements with Meredith, the Company incurs royalty
expenses based upon a percentage of net sales. Royalties owing under these
licensing agreements are applied against the $2,100,000 unearned royalty amount.
Royalties incurred through March 31, 1997 will be applied toward the unearned
royalty amount. Under this arrangement, royalties earned through June 30, 1996
were $764,423. Any remaining unearned royalty amount at March 31, 1997 will be
forgiven, and the number of Series B Common Stock will not be adjusted. Based
upon the cash paid and earned royalties through June 30, 1996, the adjusted
purchase price at June 30, 1996 would be $4.45 per share. Meredith was also
granted an option to purchase 823,532 shares of Series B Common Stock (the
"Option Shares") at an aggregate purchase price of $4,992,663. This option
expired on June 24, 1996 following the Company's initial public offering (the
"Offering"), after Meredith had exercised an option to purchase 247,219 shares.
Prior to the Offering, all Series B Common Stock was reclassified as Common
Stock.
On August 27, 1993, August 27, 1993, and January 14, 1994, the Company
entered into Subscription and Securities Purchase Agreements with and sold the
following amounts of its Series A Preferred Stock for the purchase price of
$1.00 per share to, respectively: Mr. Vanderlip, 500,000; John Zeiler, 100,000;
and the Vanderlip Children's 1988 Trust, 150,000. In October 1993, Mr. Vanderlip
made a loan to the Company in the amount of $75,000 and immediately converted
the note into 75,000 shares of Series A Preferred Stock. All of the
above-mentioned amounts of Series A Preferred Stock (collectively, the "Series A
Preferred Shares") were converted to Common Stock on a one-to-one basis on July
29, 1994, pursuant to a Conversion Agreement of the same date. Pursuant to the
Conversion Agreement, the holders also received preemptive rights to purchase
shares offered by the Company at a purchase price below $1.50 per share based on
the number of shares of Common Stock held by each holder. In connection with the
conversion of the Series A Preferred Stock, Mr. Vanderlip and Ms. Attard entered
into a Voting Agreement pursuant to which Mr. Vanderlip agreed that, so long as
Ms. Attard named him to her nominated slate of directors, he would vote at any
election of directors as directed by Ms. Attard. The Agreement provides that it
may be terminated by Ms. Attard upon the occurrence of certain events, including
the naming of another director to the Board in connection with the issuance of
securities of the Company for consideration of at least $2,000,000.
The Company has notes receivable and accrued interest from the Attards in
the amount of $81,290. These notes were assumed by the Attards in connection
with the purchase of Common Stock from another shareholder. The notes bear
interest ranging between 4% and 6%. Principal and interest is due in full on
December 31, 1996. The notes are secured by the related Common Stock.
In April 1994, the Company entered into a Consulting Agreement with Mr.
Luden whereby Mr. Luden provided consulting services to the Company in exchange
for options to purchase 64,000 shares of Common Stock at $1.00 per share.
6
<PAGE> 10
The Company has entered into a Voting Trust Agreement effective May 5,
1994, with Ms. Attard, as the voting trustee, Mr. and Ms. Attard (including Ms.
Attard in her capacity as Custodian for one for the Attards' minor children) and
James Lewis, Joan Lewis, Michael Lewis, Martha Martin, Martin Rosenberg, Mary
Ann Sutton and Dolores Wilkinson (collectively, the "Non-voting Shareholders").
Pursuant to the Voting Trust Agreement, the Non-voting Shareholders agreed to
transfer their right to vote their shares to Ms. Attard and to sell no more than
20% of the stock that they owned as of May 5, 1994 unless such additional shares
are subject to the Voting Trust. The Voting Trust Agreement is effective through
the earliest of (i) sale by Ms. Attard of at least 440,245 shares after May 5,
1994, (ii) 36 months after the closing of the Offering, (iii) the sale of the
Company, (iv) May 5, 2004 or (v) a date elected by Ms. Attard.
On June 4, 1996, Ms. Attard, Meredith and the Company entered into a Voting
Agreement (the "1996 Voting Agreement") pursuant to which Ms. Attard and
Meredith agreed that Ms. Attard would vote her shares for a single Meredith
designee to serve on the Board of Directors of the Company. Meredith agreed to
supply a qualified designee, and to vote for its designee. The 1996 Voting
Agreement does not bind either Meredith's or Ms. Attard's shares when held by an
unrelated transferee. If despite the parties' compliance with their nomination
and voting obligations under the 1996 Voting Agreement, no designee of Meredith
sits on the Board of Directors of the Company for a period of 60 days, then at
its election, Meredith may cancel its obligations under Sections 2.3(b) and
2.3(c) of the Stock Purchase Agreement. The 1996 Voting Agreement expires upon
such termination or June 30, 1999.
Contractual Arrangements
On August 11,1992, the Company entered into a license agreement with
Meredith Corporation to use Meredith's copyright, for a term of eight years, in
connection with the following works: Better Homes and Gardens New Dieter's
Cookbook, Better Homes and Gardens Complete Guide to Food and Cooking, Better
Homes and Gardens Food Facts Calorie Counts and More For 488 Common Foods (the
"1992 Meredith License Agreement"). Under the terms of the 1992 Meredith License
Agreement, the Company was also granted an eight-year nonexclusive license to
use Meredith's trademark, "Better Homes and Gardens", in North America and all
other countries where Meredith enjoys unchallenged ownership in its trademark,
for a percentage royalty, based upon retail sell-through. In June 1996, the
parties amended the 1992 Meredith License Agreement to add the books Better
Homes and Gardens Quick Healthy & Delicious Cooking and Better Homes and Gardens
Healthy Family Cookbook.
On August 30, 1993, the Company entered into a second license agreement
with Meredith (the "1993 Meredith License Agreement"). Under the terms of the
1993 Meredith License Agreement, the Company was granted an eight-year exclusive
copyright license to use the Max the Dragon Series and Max the Dragon song to
prepare its own electronic media products. The Company was granted an eight-year
worldwide nonexclusive right to use Meredith's trademark, "Max the Dragon," in
all countries where Meredith enjoys unchallenged ownership in its trademark, and
pays Meredith a percentage royalty, based upon retail sell-through. The 1993
Meredith License Agreement was later amended to allow Multicom's use of the book
"Incredibly Awesome Crafts for Kids."
On March 31, 1994, the Company entered into a third license agreement with
Meredith (the "1994 Meredith License Agreement"). Pursuant to the 1994 Meredith
License Agreement, the Company was granted an eight-year exclusive copyright
license to make, distribute, use and sell worldwide its titles relating to:
Better Homes and Gardens Complete Guide to Gardening and Better Homes and
Gardens Gardening Naturally. The Company was also granted a nonexclusive
copyright license to use certain transparencies of photographs and the
videotapes Better Homes and Gardens Foolproof Flowerbeds and Better Homes and
Gardens Solving Landscape Problems. The Company was also granted a nonexclusive
license to use Meredith's trademark "Better Homes and Gardens" throughout the
world where Meredith owns full rights in the trademark. Pursuant to the terms of
the license, the Company pays Meredith a percentage royalty fee, based upon
retail sell-through.
In August 1994, the Company issued a $200,000 note payable to Meredith
Corporation, the proceeds of which were used to purchase capital equipment. This
note bears interest at 10% per annum and principal and
7
<PAGE> 11
interest is due monthly in installments of $6,453. During fiscal year 1996, the
largest principal amount outstanding under the note was $150,507. The balance is
due in full on August 15, 1997.
On January 31, 1995, the Company entered into a fourth license agreement
with Meredith (the "1995 Meredith License Agreement"). Under the 1995 Meredith
License Agreement, the Company was granted an eight-year exclusive copyright
license to make, distribute, use and sell worldwide its Titles relating to:
Better Homes and Gardens Presents: America's Best Loved Community Recipes,
Better Homes and Gardens Complete Guide to Food and Cooking and Better Homes and
Gardens Food Facts Calorie Counts and More For 488 Common Foods (the "1995
License Works"). The Company was also granted a non-exclusive license to use
Meredith's trademark "Better Homes and Gardens" throughout the world where
Meredith enjoys unchallenged ownership in the trademark. The 1995 Meredith
License agreement obligates the Company to pay a percentage royalty, based upon
retail sell-through.
On July 31, 1995, the Company issued a $2,000,000 note payable to Meredith
Corporation, the proceeds of which were used to fund operations. This note bears
interest at 15% which is payable quarterly in Common Stock at a price of $6.07
per share. Quarterly principal payments are calculated based upon 8% of certain
sales for the quarter, as defined, with a minimum amount of $60,000 due. The
note is convertible at the holder's option into Common Stock via a partial
exercise of the Option Shares. Meredith converted $1,500,000 of the remaining
balance of the note on the effective date of the Offering which was converted
into Common Stock. This note is secured by all the Company's assets pursuant to
a Security Agreement dated as of January 31, 1996. During fiscal year 1996, the
largest principal amount outstanding under the note was $1,500,000. The balance
is due in full on July 31, 1998.
On November 1, 1995, the Company entered into a fifth license agreement
with Meredith (the "First November 1995 Meredith License Agreement"). Under the
First November 1995 Meredith License Agreement, the Company was granted an
eight-year exclusive copyright license to make, distribute, use and sell
worldwide its title relating to Better Homes and Gardens Do-It-Yourself Tips.
The Company was also granted a non-exclusive license to use Meredith's
Trademark, "Better Homes and Gardens," in those territories throughout the world
where Meredith owns unchallenged ownership in the Trademark solely in connection
with the production, advertising, promotion and sale of the title. Pursuant to
the terms of the license, the Company pays Meredith royalties on wholesale
prices of its title, based upon retail sell-through.
On November 1, 1995, the Company entered into a sixth license agreement
with Meredith (the "Second November 1995 Meredith License Agreement"). Under the
Second November 1995 Meredith License Agreement, the Company was granted an
eight-year exclusive copyright license to make, distribute, use and sell
worldwide its title relating to Better Homes and Gardens Planning Your Home. The
Company was also granted a non-exclusive license to use Meredith's Trademark,
"Better Homes and Gardens," in those territories throughout the world where
Meredith owns unchallenged ownership in the Trademark solely in connection with
the production, advertising, promotion and sale of the title. The license
further provides that the Company pay Meredith royalties on wholesale prices of
its title, based upon retail sell-through.
On November 1, 1995, the Company entered into a seventh license agreement
with Meredith (the "Third November 1995 Meredith License Agreement"). Under the
Third November 1995 Meredith License Agreement, the Company was granted an
eight-year exclusive copyright license to make, distribute, use and sell
worldwide its title relating to Better Homes and Gardens Cooking For Today. In
addition, the Company was granted a non-exclusive license to use Meredith's
Trademark, "Better Homes and Gardens," in those territories throughout the world
where Meredith owns unchallenged ownership in the Trademark solely in connection
with the production, advertising, promotion and sale of the title. The license
also obligates the Company to pay Meredith royalties on wholesale prices of its
title, based upon retail sell-through.
Effective June 4, 1996, the Company entered into an eighth license
agreement with Meredith (the "June 1996 Meredith License Agreement"). Under the
June 1996 Meredith License Agreement, the Company was granted an eight-year
exclusive copyright license to make, distribute, use and sell worldwide its
title relating to Better Homes and Gardens Remodeling Your Home. The Company was
also granted a non-exclusive license to use Meredith's Trademark, "Better Homes
and Gardens," in those territories throughout the world where Meredith owns
unchallenged ownership in the Trademark solely in connection with the
production,
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advertising, promotion and sale of the title. The license also obligates the
Company to pay Meredith royalties on wholesale prices of its title, based upon
retail sell-through.
In February 1996, the Company issued a subordinated note payable to
Meredith for approximately $484,000, which was the largest principal amount
outstanding under the note during fiscal year 1996, bearing interest at 8.25%
per annum. The balance was paid in full on June 28, 1996.
In March 1996, the Company entered into an agreement with The Moorings LLC,
a sailing yacht charter company in which Henrik N. Vanderlip has a controlling
ownership interest, to license a title engine for the development of a marketing
CD-ROM and Web site for $100,000.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of its Named
Executive Officers.
The employment agreement with Ms. Attard dated October 1995 provides for
her to serve as the Chairman and Chief Executive Officer of the Company for a
term expiring October 1998 and provides for an annual base salary during the
first quarter of fiscal year 1997 of $175,780 and an annual bonus of $20,550.
Under the terms of this employment agreement, the amount of her annual salary
and bonus is based upon the Software Publishers Association Annual Salary Survey
for the similar position in Northern California, and is adjusted quarterly. This
employment agreement entitles Ms. Attard to severance benefits equal to 12
months salary and benefits in the event of a termination of her employment by
the Company without cause or resignation by her for good reason.
The employment agreement with Mr. Attard dated October 1995 provides for
him to serve as the President and Chief Operating Officer of the Company for a
term expiring October 1998 and provides for a current annual base salary during
the first quarter of fiscal year 1997 of $175,779 and an annual bonus of
$20,550. Under the terms of this employment agreement, the amount of his annual
salary and bonus is based upon the Software Publishers Association Annual Salary
Survey for the similar position in Northern California and is adjusted
quarterly. This employment agreement entitles Mr. Attard to severance benefits
equal to 12 months salary and benefits in the event of a termination of his
employment by the Company without cause or resignation by him for good reason.
Each of the above-described employment agreements contains restrictions on
the employee engaging in competition with the Company for the term thereof, and
for up to one year thereafter, and provisions protecting the Company's
proprietary rights and information.
CHANGE IN CONTROL
Upon a change in control, options held by certain directors and executive
officers will become immediately exercisable and vested in full.
DESCRIPTION OF THE
MULTICOM PUBLISHING, INC.
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
The Company established the Option Plan in November 1994. In May 1996, the
Board of Directors amended and restated the Option Plan and renamed the Option
Plan the "Multicom Publishing, Inc. Amended and Restated 1994 Stock Option
Plan." The purpose of the Option Plan is to enable the Company to attract and
retain the services of people with training, experience and ability and to
provide additional incentive to such persons by granting them an opportunity to
participate in the ownership of the Company. As of September 30, 1996, 664,544
shares of Common Stock were reserved for issuance upon the exercise of
outstanding options at a weighted average exercise price of $4.45 per share,
with exercise prices ranging from $1.00 to $6.06, and 584,608 shares of Common
Stock remained available for future option grants.
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The following summary of the Option Plan is qualified in its entirety by
the specific language of the Option Plan, a copy of which is available to any
shareholder upon request.
General. The Option Plan provides for the grant of incentive stock options
within the meaning of section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and nonstatutory stock options. As of September 30, 1996,
options to purchase 248 shares of Common Stock granted pursuant to the Option
Plan had been exercised, 664,544 shares of Common Stock were reserved for
issuance upon the exercise of outstanding options, and 584,608 shares of Common
Stock remained available for future grants.
Shares Subject to Plan. A maximum of 1,249,400 of the authorized but
unissued or reacquired shares of Common Stock of the Company may be issued upon
the exercise of options granted pursuant to the Option Plan. In the event of any
change in the Company's capitalization without the receipt of consideration,
such as a stock dividend or a stock split, appropriate adjustments will be made
to the shares subject to the Option Plan and to outstanding options. To the
extent any outstanding option under the Option Plan expires or terminates prior
to exercise in full, the shares of Common Stock for which such option is not
exercised are returned to the Option Plan and become available for future grant.
Administration. The Option Plan is administered by the Board of Directors
or a duly appointed committee of the Board (hereinafter referred to as the
"Board"). The Option Plan provides that with respect to the participation of
individuals whose transactions in the Company's equity securities are subject to
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Option Plan must be administered in compliance with the requirements of Rule
16b-3 under the Exchange Act. Subject to the provisions of the Option Plan, the
Board determines the persons to whom options are to be granted, the number of
shares to be covered by each option, whether an option is to be an incentive
stock option or a nonstatutory stock option, the timing and terms of the
exercisability of each option, and all other terms and conditions of the
options. The Board will interpret the Option Plan and options granted
thereunder, and all determinations of the Board will be final and binding on all
persons having an interest in the Option Plan or any option.
Eligibility. Generally, all employees, directors and consultants of the
Company or of any present or future parent or subsidiary corporations of the
Company are eligible to participate in the Option Plan. However, the Option Plan
provides that no director serving on a committee intended to administer the plan
in compliance with Rule 16b-3 under the Exchange Act may be granted an option
under the Option Plan. As of September 30, 1996, the Company had approximately
67 full-time employees, including four executive officers, two of whom are also
members of the Board of Directors of the Company. In addition, the Option Plan
permits options to be granted to prospective employees and consultants in
connection with written offers of employment or engagement. Any person eligible
under the Option Plan may be granted a nonstatutory stock option. However, only
employees may be granted incentive stock options.
Terms and Conditions of Options. Each option granted under the Option Plan
is evidenced by a written agreement between the Company and the optionee
specifying the number of shares subject to the option and the other terms and
conditions of the option, consistent with the requirements of the Option Plan.
The exercise price per share of each incentive stock option must equal at least
the fair market value of a share of the Company's Common Stock on the date of
grant. The exercise price of any incentive stock option granted to a person who
at the time of grant owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company (a "Ten Percent Shareholder") must be at least 110%
of the fair market value of a share of the Company's Common Stock on the date of
grant. However, the exercise price per share of a nonstatutory stock option may
be greater or less than the fair market value of a share of the Company's Common
Stock on the date of grant.
The option exercise price may be paid in cash, by check, or in cash
equivalent, by tender of shares of the Company's Common Stock owned by the
optionee having a fair market value not less than the exercise price, by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares of Common Stock being acquired upon the exercise of the option, by means
of a promissory note, by any other lawful consideration approved by the Board,
or by any combination of these. The Board may nevertheless restrict the forms of
payment permitted in connection with any option grant.
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Options granted under the Option Plan become exercisable and vested at such
times and subject to such conditions as specified by the Board. Generally,
options granted under the Option Plan become exercisable as the underlying
shares vest. Shares subject to options generally vest in installments subject to
the optionee's continued employment or service. The maximum term of any
incentive stock option granted under the Option Plan is ten years unless granted
to a Ten Percent Shareholder, in which case the maximum term is five years.
Consistent with the Code, the Option Plan does not limit the term of any
nonstatutory stock option. Options are nontransferable by the optionee other
than by will or by the laws of descent and distribution, and are exercisable
during the optionee's lifetime only by the optionee.
Transfer of Control. The Option Plan provides that in the event of certain
transfer of control "Transactions" (as defined in the Option Plan), options
granted under the Option Plan will terminate. However, if the shareholders of
the Company receive capital stock of another corporation pursuant to the
Transaction, the Board may arrange for the outstanding options to be converted
into options to purchase shares of stock of the acquiring or successor
corporation.
Termination or Amendment. The Option Plan will continue in effect until
May 2, 2006, subject to earlier termination by the Board or the shareholders.
The shareholders may terminate or amend the Option Plan at any time. The Board
may also terminate or amend the Option Plan at any time, but, without
shareholder approval, the Board may not amend the Option Plan to increase the
total number of shares of Common Stock issuable thereunder, increase the period
during which options may be granted or exercised, change the class of persons
eligible to receive incentive stock options, or otherwise change the terms of
the Option Plan in a manner which would preclude the Company from granting
incentive stock options pursuant to the Option Plan. No amendment or termination
may adversely affect an outstanding option without the consent of the optionee,
unless the amendment is required to comply with any applicable law.
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OPTION PLAN
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
Option Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
Incentive Stock Options. An optionee recognizes no taxable income for
regular income tax purposes as the result of the grant or exercise of an
incentive stock option qualifying under Section 422 of the Code. Optionees who
do not dispose of their shares for two years following the date the option was
granted nor within one year following the exercise of the option will normally
recognize a long-term capital gain or loss equal to the difference, if any,
between the sale price and the purchase price of the shares. If an optionee
satisfies such holding periods upon a sale of the shares, the Company will not
be entitled to any deduction for federal income tax purposes. If an optionee
disposes of shares within two years after the date of grant or within one year
from the date of exercise (a "disqualifying disposition"), the difference
between the fair market value of the shares on the determination date (see
discussion under "Nonstatutory Stock Options" below) and the option exercise
price (not to exceed the gain realized on the sale if the disposition is a
transaction with respect to which a loss, if sustained, would be recognized)
will be taxed as ordinary income at the time of disposition. Any gain in excess
of that amount will be a capital gain. If a loss is recognized, there will be no
ordinary income, and such loss will be a capital loss. A capital gain or loss
will be long-term if the optionee's holding period is more than 12 months. Any
ordinary income recognized by the optionee upon the disqualifying disposition of
the shares generally should be deductible by the Company for federal income tax
purposes, except to the extent such deduction is limited by applicable
provisions of the Code or the regulations thereunder.
The difference between the option exercise price and the fair market value
of the shares on the determination date of an incentive stock option (see
discussion under "Nonstatutory Stock Options" below) is an adjustment in
computing the optionee's alternative minimum taxable income and may be subject
to an alternative minimum tax which is paid if such tax exceeds the regular tax
for the year. Special rules may apply with respect to certain subsequent sales
of the shares in a disqualifying disposition, certain basis adjustments
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for purposes of computing the alternative minimum taxable income on a subsequent
sale of the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options. Nonstatutory stock
options have no special tax status. An optionee generally recognizes no taxable
income as the result of the grant of such an option. Upon exercise of a
nonstatutory stock option, the optionee normally recognizes ordinary income in
the amount of the difference between the option exercise price and the fair
market value of the shares on the determination date (as defined below). If the
optionee is an employee or a former employee, such ordinary income generally is
subject to withholding of income and employment taxes. The "determination date"
is the date on which the option is exercised unless the shares are subject to a
substantial risk of forfeiture and are not transferable, in which case the
determination date is the earlier of (i) the date on which the shares are
transferable or (ii) the date on which the shares are not subject to a
substantial risk of forfeiture. If the determination date is after the exercise
date, the optionee may elect, pursuant to Section 83(b) of the Code, to have the
exercise date be the determination date by filing an election with the Internal
Revenue Service not later than 30 days after the date the option is exercised.
Upon the sale of stock acquired by the exercise of a nonstatutory stock option,
any gain or loss, based on the difference between the sale price and the fair
market value on the determination date, will be taxed as capital gain or loss. A
capital gain or loss will be long-term if the optionee's holding period is more
than 12 months. No tax deduction is available to the Company with respect to the
grant of a nonstatutory option or the sale of the stock acquired pursuant to
such grant. The Company generally should be entitled to a deduction equal to the
amount of ordinary income recognized by the optionee as a result of the exercise
of a nonstatutory option, except to the extent such deduction is limited by
applicable provisions of the Code or the regulations thereunder.
DESCRIPTION OF THE
MULTICOM PUBLISHING, INC.
1996 OUTSIDE DIRECTORS STOCK OPTION PLAN
The Board of Directors adopted the Multicom Publishing, Inc. 1996 Outside
Directors Stock Option Plan (the "Directors Plan") in May 1996. The purpose of
the Directors Plan is to provide an incentive to attract and retain highly
qualified persons to serve as nonemployee directors of the Company and to create
an additional incentive for the nonemployee directors to promote the growth and
profitability of the Company. As of September 30, 1996, options to purchase
7,500 shares of Common Stock had been granted under the Directors Plan.
The following summary of the Directors Plan is qualified in its entirety by
the specific language of the Directors Plan, a copy of which is available to any
shareholder upon request.
General. The Directors Plan provides for the automatic grant of
nonstatutory stock options to nonemployee directors of the Company and is
intended to qualify as a "formula plan" within the meaning of Rule 16b-3 under
the Exchange Act.
Shares Subject to Plan. A maximum of 100,000 shares of the authorized but
unissued or reacquired shares of the Common Stock of the Company may be issued
upon the exercise of options granted under the Directors Plan. Upon any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments will be made to the shares subject to the Directors
Plan, to the terms of the automatic option grants described below, and to
outstanding options. To the extent that any outstanding option under the
Directors Plan expires or terminates prior to exercise in full or if shares
issued upon the exercise of an option are repurchased by the Company, the shares
of Common Stock for which such option is not exercised or the repurchased shares
are returned to the plan and become available for future grants.
Administration. The Directors Plan is intended to operate automatically
without discretionary administration. To the extent administration is necessary,
it will be performed by the Board of Directors or a duly appointed committee of
the Board (hereinafter referred to as the "Board"). However, the Board has no
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discretion to select the nonemployee directors of the Company who are granted
options under the Directors Plan, to set the exercise price of such options, to
determine the number of shares for which or the time at which particular options
are granted or to establish the duration of such options. The Directors Plan
provides, subject to certain limitations, for indemnification by the Company of
any director, officer or employee against all reasonable expenses, including
attorneys' fees, incurred in connection with any legal action arising from such
person's action or failure to act in administering the Directors Plan. The Board
is authorized to interpret the Directors Plan and options granted thereunder,
and all determinations of the Board will be final and binding on all persons
having an interest in the Directors Plan or any option.
Eligibility. Only directors of the Company who are not at the time of
option grant employees of the Company or of any parent or subsidiary corporation
of the Company (the "Outside Directors") are eligible to participate in the
Directors Plan. Currently, the Company has three Outside Directors.
Automatic Grant of Options. Each Outside Director who is first elected to
the Board after June 24, 1996 (the "Effective Date") will automatically be
granted, on the date of his or her initial election or appointment, an option to
purchase 8,000 shares of the Company's Common Stock (an "Initial Option").
However, an Initial Option will not be granted to any person who becomes an
Outside Director while serving on the Board, or who beneficially owns, or
performs services for any entity which beneficially owns, more than 0.5% of the
total combined voting power of the Company. In addition, the Directors Plan
provides for the annual grant to each Outside Director (including Outside
Directors who did not receive an Initial Grant) of an option to purchase 2,500
shares of the Company's Common Stock (an "Annual Option"), on each anniversary
of (a) the Effective Date, if the individual was serving as an Outside Director
on the Effective Date, or (b) the date on which the individual first became an
Outside Director.
Terms and Conditions of Options. Each option granted under the Directors
Plan will be evidenced by a written agreement between the Company and the
Outside Director specifying the number of shares subject to the option and the
other terms and conditions of the option, consistent with the requirements of
the Directors Plan. The exercise price of any option granted under the Directors
Plan must equal the fair market value, as determined pursuant to the plan, of a
share of the Company's Common Stock on the date of grant. Generally, the fair
market value of the Common Stock will be the closing price per share on the date
of grant as reported on the Nasdaq Small Cap Market. No option granted under the
Directors Plan is exercisable after the expiration of 10 years after the date
such option is granted, subject to earlier termination in the event the
optionee's service with the Company ceases or in the event of a Transfer of
Control of the Company, as discussed below. Options granted under the Directors
Plan will become exercisable cumulatively in installments of 25% of the shares
subject to the option on each the first four anniversaries of the date of grant.
Generally, the exercise price may be paid in cash, by check, or in cash
equivalent, by tender of shares of the Company's Common Stock owned by the
optionee having a fair market value not less than the exercise price, by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares of Common Stock being acquired upon the exercise of the option, or by any
combination of these. During the lifetime of the optionee, the option may be
exercised only by the optionee. An option may not be transferred or assigned,
except by will or the laws of descent and distribution.
Transfer of Control. The Directors Plan provides that, in the event of (i)
a sale or exchange by the shareholders in a single or series of related
transactions of more than 50% of the Company's voting stock, (ii) a merger or
consolidation in which the Company is a party, (iii) the sale, exchange or
transfer of all or substantially all of the assets of the Company, or (iv) a
liquidation or dissolution of the Company wherein, upon any such event, the
shareholders of the Company immediately before such event do not retain direct
or indirect beneficial ownership of more than 50% of the total combined voting
power of the voting stock of the Company, its successor, or the corporation to
which the assets of the Company were transferred (a "Transfer of Control"), all
options outstanding under the Directors Plan will become immediately exercisable
and vested in full as of the date 10 days prior to the Transfer of Control. In
addition, the acquiring or successor corporation may assume or substitute
substantially equivalent options for the options outstanding under the Directors
Plan. To the extent that the options outstanding under the Directors Plan are
not assumed, substituted for, or exercised prior to the Transfer of Control,
they will terminate.
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Termination or Amendment. The Directors Plan will continue until
terminated by the Board or until all of the shares reserved for issuance under
the plan have been issued. The Board may terminate or amend the Directors Plan
at any time. However, subject to changes in the law that would permit otherwise,
without shareholder approval, the Board may not amend the Directors Plan to
increase the total number of shares of Common Stock reserved for issuance
thereunder or expand the class of persons eligible to receive options. The
provisions of the Directors Plan addressing eligibility to participate in the
plan and the amount, price and time of the grant of options may not be amended
more than once every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act of 1974, or the rules thereunder. No
termination or amendment of the Directors Plan may adversely affect an
outstanding option without the consent of the optionee, unless such termination
or amendment is necessary to comply with any applicable law.
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
For a description of the United States federal income tax consequences
under current law of nonstatutory stock options granted under the Directors
Plan, please see the discussion above under "DESCRIPTION OF THE MULTICOM
PUBLISHING, INC. AMENDED AND RESTATED 1994 STOCK OPTION PLAN -- Summary of
United States Federal Income Tax Consequences of the Option Plan."
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of Price Waterhouse LLP as the Company's independent
accountants for the 1997 fiscal year, subject to ratification by the
shareholders. Representatives of Price Waterhouse LLP are expected to be present
at the Company's Annual Meeting. They will have an opportunity to make a
statement, if they desire to do so, and will be available to respond to
appropriate questions.
REQUIRED VOTE
The ratification of the appointment of Price Waterhouse LLP requires the
affirmative vote of a majority of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE LLP.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Company's Board of Directors held seven meetings during the 1996 fiscal
year. All directors attended at least 75% of the aggregate number of meetings of
the Board and of the committees on which such directors serve.
Effective June 24, 1996, the Board of Directors of the Company has
appointed an Audit Committee and a Compensation Committee of the Board. No
meetings of the Audit or Compensation committees were held during fiscal year
1996.
The current members of the Audit Committee are Messrs. Hartsook, Luden and
Vanderlip. Its functions are to monitor the effectiveness of the audit effort,
to supervise the Company's financial and accounting organization and financial
reporting, and to select a firm of certified public accountants whose duty it is
to audit the books and accounts of the Company for the fiscal year for which
they are appointed.
The current members of the Compensation Committee are Messrs. Hartsook,
Luden and Vanderlip. The Compensation Committee's functions are to determine and
supervise compensation to be paid to officers and directors of the Company and
to supervise and manage the Company's stock option plans.
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SHAREHOLDER PROPOSALS
To be considered for presentation at the Annual Meeting of Shareholders to
be held in November 1997, a shareholder proposal must be received at the offices
of the Company, 1100 Olive Way, Suite 1250, Seattle, Washington 98101, not later
than July 3, 1997.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be voted
in accordance with the judgment of the persons voting the proxies.
Whether you intend to be present at the Annual Meeting or not, we urge you
to return your signed proxy promptly.
By order of the Board of Directors,
PAUL G. ATTARD
Secretary
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